Question

Suppose a financial manager buys call options on 24,000 barrels of oil with an exercise price of $119 per barrel. She simultaneously sells a put option on 24,000 barrels of oil with the same exercise price of $119 per barrel. What are her payoffs per barrel if oil prices are $103, $108, $119, $130, and $135? (Leave no cells blank - be certain to enter "O" wherever required. A negative answer should be indicated by a minus sign.) 130 $ 135 Market price Payoffs per barrel 108 $ 119 103 $ $

Answer 1

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NPV, IRR, PBP,OCFINDEX - Microsoft Excel (Product Activation Failed) View Add-Ins Data Review - 2x A = = = V General Wrap Text Merge & Center - Σ AutoSum : A Fill 2 Sort & m Find & $ % 88 Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles 2 Clear Filter Editing Select Alignment Number Cells File Home Insert Page Layout Formulas % Cut Calibri 11 A Ea Copy Paste Format Painter BI U D A Clipboard Font IT517 L J IK 498 499 bought call options = sell put options = IL IM IN O P Q IR ISITIU IV 24000 BARRLES 24000 BARRLES 500 exercise price = exercise price = 119 119 501 market price pay off on call options on put options 502 503 504 505 506 payoff per barrel A+B -16 -11 ---------- answer 507 103 108 119 130 135 11 16 508 509 510 511 512 513 buy call options = will exercise only when market price > exercise price so 119 is breakeven price At 130, pay off will be (130-119)= 11 and at 135 it will be (135-119) = 16 514 515 516 517 518 sell put options = you are a writer, so your payoff will be zero or negative if price goes below exercise price, your pay off will be negative, otherwise zero so when price is 103, payoff = (103-119)=-16 and at 108, pay off will be (108-119) =-11 K O FCFARM, MSI,confidenceINDEX CURRENCY LOAN CROSS OVER HEDGING MONEY MARKET GM HPR AM TAX CF CASH FLOW STATW ferences Rea GROWTH SUST_PREF AND DIV POLICY 200 120% B 9 * R 40 1 + 24-11-2019 2. ENG